Case Law Details

Case Name : DCIT Vs. M/s Mastercard International Inc (ITAT Delhi)
Appeal Number : I.T.A. No. 5109/DEL/2015
Date of Judgement/Order : 22/11/2017
Related Assessment Year : 2006- 07
Courts : All ITAT (5330) ITAT Delhi (1212)

DCIT Vs. M/s Master card International Inc (ITAT Delhi)

Solitary issue raised by the Revenue is against the decision of the Ld. CIT(A) in holding that interest u/s.234B is not leviable in respect of payments to the non-resident assessee, being subject to tax deduction at source u/s. 195 of the Act. We find that the issue has been decided in favour of the assessee by the Hon’ble Delhi High Court, in earlier assessment years, in assesee’s own case. Further, the Ld. CIT(A) in assessee’s own case for AY 2005-06 and 2008-09 in Appeal nos. 160 and 162/10-11 vide order dated 14.2.2013, decided the issue in favour of the assessee by adjudicating the issue in dispute, vide para no. 4 of his order as under:-

“Ground of Appeal No. 5 is regarding levying of interest u/s. 234B of the Act.

The appellant has submitted that since tax is deductible u/s. 195 on all payments made to it, there is no advance tax payable u/s. 208 r.w.s. 209(1)9d) of the Act. In the absence of any liability to pay advance tax, the provisions of section 234B are not applicable. The appellant has relied upon following case laws:

– DIT vs. Jacobs Civil Incorporated, 330 ITR 578 (Del).

– DIT vs. NGC Network Asia LLC 313 ITR 187 (Bom).

– Motorola Communications Inc. 95 ITD 269 (Delhi-SB) ITAT

– CIT vs. Sedco Forex International Drilling 264 ITR 320 (Uttaranchal)

In view of jurisdictional Delhi High Court decision, I hold that interest u/s. 234B is not leviable as all payments to the non-resident appellant are subject to tax deduction at source u/s. 195. The AO is directed to delete the interest levied u/s. 234B. This ground of appeal is allowed.”

We hold that interest u/s. 234B is not leviable as all payments to the non-resident assessee are subject to tax deduction at source u/s. 195. Hence, the decision of the Ld. CIT(A) in directing the AO to delete the interest levied u/s. 234B is correct, which does not need any interference on our part, hence, we uphold the action of the Ld. CIT(A) on the issue in dispute and reject the ground raised by the Revenue.

Full Text of the ITAT Order is as follows:-

The Revenue has filed this Appeal against the impugned Order dated 13.05.2015 of the Ld. CIT(A)-43, New Delhi relevant to assessment year 2006-07.

2. The following are the grounds raised by the Revenue:-

“1. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law in deleting the interest chargeable u/s. 234B by holding that interest is not leviable in respect of payments to the non-resident appellant, being subject to tax deduction at source u/s. 195 of the I.T. Act, 1961.

2. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law by ignoring the decision of Hon’ble Supreme Court in the case of Karanvir Singh Ghosa vs. CIT in Civil Appeal No. 1937 of 2007, September 6, 2012 and CIT vs. Anjum MH Ghaswala & others (2001) 252 ITR 1, wherein the Supreme Court has held that interest u/s. 234B is mandatory in nature.

3. The appellant craves to add, amend, modify or alter any grounds of appeal at the time or before the hearing of the appeal.

3. The brief facts of the case are that Assessee filed return of income on 30.11.2006 declaring a total income of Rs. 9,17,24,589/-. Notice dated 27.3.2012 was issued to the assessee under section 148 of the I.T. Act, 1961 initiating reassessment proceedings for the subject assessment year wherein the assessee was asked to furnish its return of income for the year ended 31.3.2006. This notice was served upon the assesse on 9th April, 2012. In response to the notice, the AR of the assessee company attended the proceedings. The Assessee in its letter dated 23.4.2012 submitted that the original return of income filed on 30.11.2006 may be considered as filed u/s. 148 of the Act. The assessee also sought reasons for initiating proceedings u/s. 148 of the Act. A copy of reasons was given to the assessee. The assessee vide its letter dated 4.3.2013 raised various objections against the assessment proceedings which were duly disposed off. Subsequently notices u/s. 142(1) and 143(2) of the Act were issued to the assessee. The assessee is a company incorporated in USA and is engaged in the business of administering and operating a global electronic payment system, which enables its members of commercial banks and other financial institutions to authorize and settle transactions between themselves. The assessee had been filing a NIL return of income in earlier years on the basis that although it has business connection in India but the income arising there from is not taxable in India since it does not have any Permanent Establishment (PE) in India. This issue has, however, been settled after it was taken up in the MAP proceedings. The Indian Competent Authority in consultation with the US Competent Authority passed the MAP orders for AY 1996-97 to AY 2001-02, which stated that the assessee has a PE in India as per Article 5 of the DTAA and the income attributable to such PE is taxable in India on a net income basis. In the instant year the Assessee has again filed its return of income on GNOM basis, which is in consultation to the system being followed from assessment year 2005-06. In this return the assessee declared total revenues of Rs. 46,68,64,577/- and global operating margin of 16.55%. It has been observed that the global operating margin percentage of the assessee has gradually increased over the years with the margin being 14.64% in AY 2005-06, 22.85% in AY 2007- 08, 30.76% in AY 2008-09, 40.16% in AY 2009-10 and so and so forth. In the assessment years 2009-10 and 2010-11 the assessment has been made on Net Margin Method and the assessee has gone for MAP resolution which is pending. In view of the above past history of the assessee and the MAP resolution for AY 2005-06, AY 2007-08 and AY 2008-09 in favour of GNOM method, the GNOM method for computation of income for the subject assessment year is accepted. This also in line with the method being followed in the subsequent assessment years till assessment year 2013-14, the return up to which assessment year have been filed till date. The current assessment year (AY 2006-07) being the intervening year between the years for which MAP resolution has been passed and considering the increasing trend of the operating margin, it is estimated that the percentage for AY 2006-07 should fall between margin percentages for AY 2005-06 and AY 2007-08. The margin percentage as computed by Competent Authorities under the MAP resolution for AY 2005-06 is 18.14% and for AY 2007-08 it is 23.85%. Accordingly, the margin percentage applicable on the assessee for the subject year is increased from 16.55% to 20% and accordingly, the income of the assessee was assessed at Rs. 10,78,31,687/- and inter u/s. 234B of the Act has also been levied vide order dated 28.5.2014 passed u/s. 144C(3) read with section 148/143(3) of the I.T. Act, 1961. Against the aforesaid AO’s order dated 28.5.2014, assessee appealed before the Ld. CIT(A)-43, New Delhi who vide his impugned order dated 13.5.2015 has held that interest u/s. 234B is not leviable as all payments at source u/s. 195 and allowed the appeal of the assessee. Aggrieved with the order of the Ld. CIT(A), the Revenue is in appeal before the Tribunal.

4. Ld. DR relied upon the Order of the AO and reiterated the contentions raised in the grounds of appeal.

5. Ld. Counsel of the assessee relied upon the order of the Ld CIT(A).

6. We have heard both the parties and perused the relevant records, especially the impugned order. We find that the

6.1 In the background of the aforesaid discussions and respectfully following the above mentioned precedents, we hold that interest u/s. 234B is not leviable as all payments to the non-resident assessee are subject to tax deduction at source u/s. 195. Hence, the decision of the Ld. CIT(A) in directing the AO to delete the interest levied u/s. 234B is correct, which does not need any interference on our part, hence, we uphold the action of the Ld. CIT(A) on the issue in dispute and reject the ground raised by the Revenue.

7. In the result, the Appeal filed by the Department stands dismissed.

Order pronounced on 22/11/2017.

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